PA 09-202—sSB 1033

Planning and Development Committee

Finance, Revenue and Bonding Committee

Appropriations Committee


SUMMARY: This act establishes a tax credit for taxpayers who build buildings that meet certain energy and environmental standards (“green buildings”). The credits can be taken against the corporation business, insurance company, air carriers, railroad company, utility company, and income taxes. The act limits the credit for all projects to $25 million dollars.

The act specifies the projects and their costs that are eligible for the credit. It entitles eligible projects to a base credit that increases with the project's rating. It allows additional credits for mixed-use projects and those located in certain areas. Taxpayers can claim only 25% of the credit in any tax year and may carry remainder forward for up to five years. The credits are transferrable and assignable.

The act requires the Office of Policy and Management (OPM) secretary, in consultation with the revenue services commissioner, to adopt credit regulations, by January 1, 2011. It requires the secretary to establish a uniform application fee of up to $10,000 to cover all direct costs of administering the tax credit program. It allows the secretary to hire a private consultant or outside firm to administer and review applications for the program.

The act requires the secretary, in consultation with the commissioner, to report to the governor and Planning and Development and Finance, Revenue and Bonding committees by July 1, 2013 on (1) the number of taxpayers applying for the credits, (2) the amount of credits granted, (3) the geographical distribution of the granted credits, and (4) any other information deemed appropriate. A preliminary draft report must be submitted to the governor and the committees by July 1, 2012.

EFFECTIVE DATE: July 1, 2009, with the credits applying to income years starting on or after January 1, 2012.


Under the act, an eligible project is a real estate development located in the state that is designed to meet or exceed the applicable Leadership in Energy and Environmental Design (LEED) Green Building Rating System gold certification or equivalent standard as determined by the environmental protection commissioner. To be eligible, the project must have energy use of no more than (1) 70% of the energy use permitted by the State Building Code for new construction or (2) 80% of the energy use permitted by the state energy code for building renovation or rehabilitation. In addition, the project must use equipment and appliances that meet Energy Star standards, if applicable, for such things as refrigerators, dishwashers, and washing machines. If a development consists of more than one building, only the buildings that meet these standards are eligible for the credit. The credits apply to newly constructed buildings that receive a certificate of occupancy on or after January 1, 2010.

To count towards the credit, a development cost must be chargeable to the project's capital account. These allowable costs include, among others:

1. construction or rehabilitation costs;

2. commissioning costs;

3. architectural and engineering fees that can be allocated to construction or rehabilitation, including energy modeling;

4. site costs, such as temporary electric wiring, scaffolding, demolition costs, and fencing and security facilities; and

5. costs of carpeting, partitions, walls and wall coverings, ceilings, lighting, plumbing, electrical wiring, mechanical, heating, cooling, and ventilation.

The purchase of land, any remediation costs, and the cost of telephone systems or computers are not allowable costs. The act caps allowable costs at $250 per square foot for new construction and $150 (presumably per square foot) for building renovation or rehabilitation.


The LEED rating system has four levels; certified, silver, gold, and platinum, with a building's rating depending on its number of “green” features.

Under the act, the base credit for new construction or major renovation of a building (but not other site improvements) that receives a gold rating under LEED is 8% of allowable costs; for buildings that receive a platinum rating, the credit is 10. 5%. For core and shell or commercial interior projects, the credit is 5% of allowable costs for a gold rating and 7% of allowable costs for a platinum rating. In all cases, the credit is the same for the equivalent rating under an alternative rating system, as determined by the environmental protection commissioner.

In addition, a project receives a credit of 0. 5% of its allowable costs if it:

1. is a mixed use development, i. e. , one consisting of one or more buildings that includes residential use and in which up to 75% of the interior square footage has at least one of the following uses: (a) commercial use; (b) office use; (c) retail use; or (d) any other nonresidential use that the OPM secretary determines does not pose a public health threat or nuisance to nearby residential areas;

2. is located in an enterprise zone or brownfield, as defined by statute;

3. does not require a sewer line extension of more than one-eighth mile; or

4. is located within one-quarter mile of a public bus service or within one-half mile of adequate rail, light rail, streetcar, or ferry service. (In the case of multi-building projects, at least one of the buildings must meet this criterion. )


Credit Vouchers

The OPM secretary must issue an initial credit voucher if he determines that the applicant is likely, within a reasonable time, to place in service property that would be eligible for a credit. The vouchers must state (1) the first taxable year for which the credit may be claimed; (2) the maximum amount of credit allowable; and (3) an expiration date by which such property must be placed in service, which the secretary may extend at his discretion. The vouchers must reserve the credit allowable for the applicant named in the application until the expiration date. The secretary may extend the reservation at his discretion. The secretary may not issue initial credit vouchers for more than $25 million in the aggregate.

Eligibility Certificate

The taxpayer must obtain an eligibility certificate for each taxable year for which he or she claims a credit. The taxpayer must obtain this certificate from an architect or professional engineer who is licensed in Connecticut and accredited through the LEED Accredited Professional Program or program the environmental protection commissioner determines to be equivalent. The document must certify, under the architect's or engineer's seal, that the building, base building, or tenant space for which the credit is claimed meets or exceeds the applicable LEED gold certification (or other certification the commissioner considers equivalent) that was in effect when the building was certified. The certification must include the specific findings upon which it is based and state that the architect or engineer is accredited through the accredited professional program.

Claiming Credits

To claim the credit, the applicant must file with the revenue services commissioner (1) the initial credit voucher, (2) the eligibility certificate, and (3) an application to claim the credit. The applicant must send a copy of the documents to the OPM secretary. Taxpayers can only claim 25% of the credit in any tax year and may carry forward the remainder for up to five years.


Under the act, credits may be assigned or otherwise transferred. A project owner may transfer a credit to a pass-through partner in return for a lump sum payment. (This approach can be used if the project owner is a nonprofit, among other situations. )

Any subsequent successor in interest to the property that is eligible for a credit may claim it if the deed transferring the property assigns the successor this right, unless the deed specifies that the seller retains the right to claim the credit. Any subsequent tenant of a building for which a credit was granted may claim it for whatever the period after the termination of the previous tenancy that the credit would have been allowable to the previous tenant.


LEED Rating System

The U. S. Green Building Council has established rating systems for a variety of developments. There are separate rating systems for new, and major renovations of, commercial, institutional, and government buildings; commercial building interiors; the core and shell of commercial buildings, which covers such elements as the building envelope and heating, ventilation, and air conditioning systems; retail establishments; and health care facilities. LEED addresses a building's performance in five areas: sustainable site development, water savings, energy efficiency, material selection, and indoor environmental quality. Participating buildings can be rated as certified, silver, gold, or platinum.

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